China’s LGFV Crackdown Shows Results With Debt Cut by Over 60%
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China has slashed the number of its local government financing vehicles (LGFVs) by 71% and cut their business-related financial debt by 62% since early 2023, the country’s central bank governor said — marking a significant milestone in Beijing’s campaign to defuse one of the greatest threats to its economy.
As of the end of September 2025, both the number of LGFVs and their outstanding financial obligations had dropped dramatically compared with March 2023 levels, People’s Bank of China Governor Pan Gongsheng said in a report on financial work presented to the National People’s Congress Standing Committee on behalf of the State Council.
Pan told lawmakers on Oct. 26 that risks stemming from LGFV debt have been “significantly mitigated.”
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- China reduced the number of LGFVs by 71% and their business-related debt by 62% from March 2023 to September 2025.
- Over 60% of LGFVs were removed from the government list by June 2025, aided by refinancing bonds, loan restructuring, and emergency liquidity support.
- Challenges remain for ensuring LGFVs' sustainable operation and managing risks at smaller banks despite progress in debt reduction.
- Early 2023：
- China initiated a campaign to reduce the number of local government financing vehicles (LGFVs) and decrease their financial debt.
- March 2023：
- Reference point for LGFVs numbers and outstanding obligations before reductions.
- July 2023：
- China launched a broad debt resolution initiative involving fiscal and financial measures, including the issuance of special refinancing bonds and instructing banks to restructure LGFV loans.
- By end of June 2025：
- More than 60% of LGFVs had been removed from the official government financing platform list.
- As of the end of September 2025：
- The number of LGFVs and their outstanding financial obligations had dropped dramatically compared with March 2023.
- October 26, 2025：
- People’s Bank of China Governor Pan Gongsheng reported to lawmakers that LGFV debt risks had been significantly mitigated.
- October 2025：
- The National People’s Congress Financial and Economic Affairs Committee issued a report on the LGFV reductions and ongoing challenges.
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